Lost wages

When an employee has a personal grievance for unjustifiable dismissal, the Employment Relations Act provides a range of remedies which the Authority or Court can award. These include lost remuneration (e.g. lost wages) as a result of the personal grievance.

Until recently, it was generally accepted that if an employee was dismissed and the procedure was flawed, then they would be able to claim for lost wages (as well as compensation for humiliation, loss of dignity and injury to feelings). However, a recent Employment Court case has taken a different approach in a situation where the flawed procedure did not affect the outcome.

Waterford Holdings Limited v Morunga

Mr Morunga was a herd manager employed on WHL’s dairy farm. The employer became aware of a number of very serious allegations of animal cruelty, including driving farm bikes into stock, slamming gates into them, and kicking and yelling at the stock.
The employer undertook an investigation and obtained written statements from a number of witnesses. These statements did not identify Mr Morunga as the person who had been seen engaging in the animal cruelty. Most importantly, these statements were not provided to Mr Morunga during the disciplinary process. The fact that Mr Morunga was the person referred to in one of the statements did not get clarified with one of the witnesses and a further eye witness was identified who corroborated what had occurred. This was put to Mr Morunga’s representative for comment before the dismissal decision was made.

In the Authority, while the conduct was found to have substantively justified the dismissal, the procedural errors were more than minor/technical and Mr Morunga was awarded lost remuneration and compensation for humiliation. These awards were reduced by 50% for his contribution.

The Authority decision was the subject of some commentary suggesting that the standard for procedural fairness was being set too high. WHL challenged the decision to the Employment Court.

The Court upheld the Authority’s finding that the investigation was procedurally flawed. Providing an employee with the opportunity to inspect relevant information during a disciplinary process is a crucial obligation under the Act. In this case the procedural flaws were not minor and inconsequential. This was because Mr Morunga’s refusal to admit what he had done had been a factor in the employer’s decision to dismiss him. It was thought that Mr Morunga may not have denied his actions if he had actually seen the statements.

Despite the procedural errors the Court did overturn the Authority’s decision to compensate Mr Morunga for lost remuneration. The Court said that because Mr Morunga’s conduct was so egregious, and he continued to aggressively deny his involvement, the ultimate outcome of the process (dismissal) would not have been any different, even if a full and fair procedure had been followed. Because of this, the Court decided that the procedural errors had not caused any lost remuneration. That loss was caused by the substantively justified decision to dismiss. Accordingly, no award for lost remuneration was appropriate.

It is also worth noting that the Court considered Mr Morunga’s conduct was so bad that it reduced any remedy for hurt and humiliation by 100%. So despite procedural failings, WHL did not have to pay Mr Morunga anything.

What does this mean for procedural fairness?

It would be tempting to think that this gives employers a free pass to cut corners with procedure where they think an employee has committed very serious misconduct. However, there are a number of problems with that approach:

Without conducting a full and fair investigation, an employer may not know how serious the alleged conduct is, or if the employee even “did the crime”. Further, in the heat of the moment an employer may consider something to be very serious which the Authority has previously deemed a misdemeanour. Unless you can prove that the conduct did occur, and that the process flaw would not reasonably have affected the outcome, then the Morunga case is unlikely to help. Cases where there are no factors in the employee’s favour are rare. Also, not following a fair process in many cases may mean the final decision was not substantively justified.

Failure to carry out a full and fair investigation does still leave employers open to awards for hurt and humiliation and 100% reductions for contribution are also extremely rare.

Employees who feel they did not get a fair hearing when being dismissed are more likely to raise personal grievances or claims in the Authority even where the dismissal might be warranted. Even if an employer is successful in defending such a claim, this will involve defence costs and the time and distraction in dealing with the grievance.

Cases where a flawed procedure would not have affected the outcome of the process are likely to be few and far between. Employers are best advised to get the procedure right than have to try and convince the Authority or the Court that the process did not matter, or to rely on the seriousness of the employee’s conduct to reduce any remedies.

How we can help

Jackson Russell is experienced in dealing with all aspects of employment law and are experts in disciplinary matters. We regularly assist employers and employees through disciplinary processes including advice on procedural fairness.

If you would like further information about a disciplinary matter, or require advice on anything related to employment relations, please contact your usual Jackson Russell advisor or our employment law specialists.